Australian FOREX Weekly Outlook 17/12/2007

FED cut rates by 25 basis points, BoE minutes due this week  

17/12/07                                                                                                                                                                                                                 

last week’s currency trading review

The Dollar saw the Fed cut rates by 25 bps to 4.25% on Tuesday, and further trimmed the discount rate by 25 bps. Market reacted in a volatile manner, as stock prices dropped on hopes of a 50 bps cut. The rate cut was greeted with dovish comments form Fed officials, identifying slowing growth, ongoing housing concerns, and a deterioration of financial markets. The Fed led a group of Central banks on Wednesday, including the ECB, BoE, BOC, and the SNB joining forces in an attempt to stem credit market losses and encourage borrowing amongst private banks. Data out of the US the week strongly, with Thursdays Retail Sales and PPI figures indicating a rise in consumption, whilst Fridays CPI data showed its quickest acceleration in almost two years caused for significant USD strength against a number of majors. The Euro ended the week down by 1.5% against a broadly stronger dollar. Despite hawkish comments from ECB officials earlier in the week, whilst the ZEW survey recording it lowest level in 14 years, whilst CPI figures were flat to round off the week. The Euro closed last week at 1.4422 having opened at 1.4653. The Japanese Yen was quiet for the major part of the week, trading on the back of other majors, and stock prices once again being used as a gauge for carry trades. Tankan survey for the 4^th quarter was at its lowest level in 2 years on Friday. The JPY closed last week at 113.36 having opened at 111.66 The GBP was extremely volatile throughout the week as PPI data showed considerable acceleration, assuming that the BoE would be inclined to keep rates on hold for some time. The GBP closed last week at 2.0171 having opened at 2.0319. The AUD saw the unemployment rate rise form 4.3% to 4.5% on Thursday as the Aussie dollar ended the weak lower versus the dollar. The AUD closed last week at 0.8615 having opened at 0.8778.    

The forex trading week preview

In the States Ny Fed, TIC Flows, and Current account on Monday. Housing on Tuesday, GDP and Philly Fed on Thursday. Core PCE and Michigan Sentiment on Friday. We will provide our previews and reviews of these data releases in the daily summary.

In the Eurozone PMI Services and Manufacturing on Monday, ahead of ECB officials speaking throughout the week. In the UK House prices (Monday), CPI (Tuesday), BoE Minutes (Wednesday), GDP (Thursday), Retail Sales (Friday). We will provide our previews and reviews of these data releases in the daily summary.

In Japan Trade Balance and BoJ rate announcement on Thursday. We will provide our previews and reviews of these data releases in the daily summary.

In Australia little data out of Australia, NZ Current account and GDP on Wednesday and Thursday. We will provide our previews and reviews of these data releases in the daily summary.

TECHNICAL COMMENTARY

 

Currency	Sup 2	Sup 1	Spot	Res 1	Res 2
EUR/USD	1.4307	1.4354	1.4395	1.4658	1.4749
USD/JPY	111.42	112.23	113.30	113.85	113.89
GBP/USD	2.0086	2.0149	2.0165	2.0448	2.0484
AUD/USD	0.8538	0.8606	0.8635	0.8795	0.8921
XAU/USD	777.20	788.00	794.40	812.20	817.20

·                Euro – 1.4395

Initial support at 1.4354 (38.2% retracement of the 1.3361 to 1.4968 advance) followed by 1.4307 (1.4751 minus 1.4968 – 1.4528). Initial resistance is now located at 1.4658 (Dec 14 high) followed by 1.4749 (Dec 12 high).

·                Yen – 111.95

Initial support is located at 112.23 (Dec 14 low) followed by 111.42 (Dec 13 low). Initial resistance is now at 113.85 (61.8% retracement of the 117.95 to 107.23 decline) followed by 113.89 (Nov 8 high)

·                Pound – 2.0165

Initial support at 2.0149 (Dec 14 low) followed by 2.0086 (Sep 25 low). Initial resistance is now at 2.0448 (Dec 14 high) followed by 2.0484 (Dec 13 high)

·                Australian Dollar – 0.8635

Initial support a 0.8606 (Dec 14 low) followed by 0.8538 (38.2% retracement of the 0.7676 to 0.9400 advance). Initial resistance is now at 0.8795 (Dec 14 high) followed by 0.8907 (Dec 12 high)

·                Gold – 794.40

Initial support at 788.00 (Dec 14 low) followed by 777.20 (Dec 3 low). Initial resistance is now at 812.20 (Dec 13 high) followed by 817.20 (December 12 high)